Kool King Division (A) 1. Evaluate Evaluate the company company’s ’s operations operations during during fiscal fiscal year year 1979. a) What were the principa principall proble problems? ms? b) What What streng strengths ths do you you see? see? Solution 1. Principal Problems of the company’s operations during fiscal year 1979 were: • • • • • •
Kool King incurred losses due to stock outs of 208 volt models They are facing an increasing number of quality complaints Maintaining market share in a growing market Deal with a seasonal trend in air conditioner demand Maintain a steady work force Deal with shutdowns
Strengths: •
• •
Strategies adopted to increase the length of demand period of air conditioners. Eg. Early order discount plan The planned production plan took all product mixes in account Flexible production schedule
2. What proble problems ms experienc experienced ed in 1979, are are likely likely to recur in 1980? 1980? Product Quality: Increasing number of quality complaints. Strive to maintain the market share in a growing market Deal with seasonal demand trend for air conditioners Deal with shutdowns
• • •
3. Look caref carefully ully at at Kool King’ King’ss use of capacity. capacity. a) Can they they meet meet the the 1980 1980 forec forecast? ast? The 1980 forecast can be met subject to meeting the labour enhancements. Also Also,, the the capac apacit ityy of the the ware wareho hous use e has has to be incr increa ease sed d to me meet et the the prod produc ucti tion on requirements.
4. As an operat operation ionss manage manager, r, estab establis lish h an aggreg aggregate ate plan plan and describ describe e operat operating ing policies policies to revise production schedules. (Hint: For developing the aggregate plan, you may exclude super and slimline from the calculations. Aggregate all other products and choose an appropriate unit of aggregation. In addition to evaluating the chase and level production strategies, develop a hybrid strategy that takes into account inventory and the cost of changing capacity while meeting the demands.)
Solution:
KOOL KING - Fiscal year 1980
Particulars
Midget
Mighty Breeze Breeze Midget
Queen
King
41,000 2,165
8,000 -
Islander Super
Estimated FY1980 Sales Inventory Sept 1'1979 Inventory Sept 1'1980
46,500 -
11,000 1,420
5,000 2,605
1,500 312
Cost ($) optimal Model Changeover No. of change / year Per change Model makeover cost/change Shift lost in Changeover
300 8,300 6 6,000 30,000 12
350 8,300 1 6,000 6,000 2
8,300 5 6,000 24,000 10
8,300 1 6,000 6,000 1
8,300 1 6,000 1
8,300 0 6,000 -
0.08 3,720
0.07 770
0.11 4,510
0.07 560
0.10 500
0.22 330
Slim Line Sum Total
10,000 1,512
1,23,000 8,014 8,014
8,300 1 6,000 6,000 1
650 41,500 13 30,000 66,000 26
-
1 10,390
Labor
Direct Labor Index / Unit Direct Labor index / Model
Inventory Policy:
To minimize our inventory cost, we cannot go for all year fixed Production and Procurement method.
So we divided year into 3 parts:
a) Off Peak Season ( Sept – March) b) Peak Season (April – July) c) Shutdown Period (August – Sept)
Cumulative aggregate production for year 1980 is 123,000 units for 12 months between September 1979 and August 1980. In fixed rate of production
Production per month = (120,000/12) = 10,000 units. But Shipping per month for the first 6 month is = (30000/6)= 5,000 units Inventory (avg) per month = (10000-5000) = 5,000 units
Means 50% of the production output is getting locked up (i.e. Inventory) So, we can vary the production as per the off peak season and peak season
Maintaining produce 8300 units for first 6 months and 16250 for the next 6 months This includes 15 days inventory buffer stock.
Month
Monthly Production
Cumulative Production
8300 8300 8300 8300 8300 8300 8300 16250 16250 16250 16250
8300
1196
16600 24900 33200 41500 49800 58100 74350 90600 106850 123100
8967 12554 17934 24510 35868 44954 64681 84767 103299 123026
Sept oct nov dec jan feb mar apr may jun jul
Cumulative shipment
FISCAL YEAR 1980
Month
Monthly Production
Cumulative Production
Shipment per month
Shipment per month
Cumulative shipment
Inventory per month
Total Inventory
(1979)
(1980)
1979 carry
September October November December January February March April May June July August (closing)
8300 8300 8300 8300 8300 8300 8300 16250 16250 16250 16250
8300 16600 24900 33200 41500 49800 58100 74350 90600 106850 123100
1000 6500 3000 4500 5500 9500 7600 16500 16800 15500 16500
1196 8967 12554 17934 24510 35868 44954 64681 84767 103299 123026
7104 7633 12346 15266 16990 13932 13146 9669 5833 3551 74
8013
30
FISCAL YEAR 1980
d h T n25 a u o s 20
1196 7771 3587 5380 6576 11358 9086 19727 20086 18532 19727
8013 15117 15646 20359 23279 25003 21945 21159 17682 13846 11564 8087
25000
20000
y =-472.86x +19442 R²=0.094 15000
15 10000 10
5000 5
0
0
Total Inventory
Monthly Production
Shipment per month(1980)
Linear (Total Inventory)
5. What should Mr.Lewis do?
Mr Lewis should adopt a two phase production strategy. The cumulative productions in both the phases will be fixed but differential. This will lead to accumulating inventory at an optimum level in the off peak season. Production at demand level in the peak season and use of accumulated inventory from the off peak season can be used to meet the increased demands. This would mandate provisioning for the increased labour for increased production in 1980. Additional Information for analysing Kool King Case:
1. Assume the following cost structure when you are evaluating alternatives: Inventory carrying cost = $30/unit/year Cost of hiring = $284.50/worker Cost of layoff = $81/worker Regular wages = $6/hour Overtime Wages = $9/hour • • • • •
2. Assume one shift operation of line would require 112 workers. 3. Assume that each shift is 8 hours long. Underproduction is permitted. However, the workers get paid for the entire shift length. 4. Plant shutdown in fiscal 1980 is assumed to be one month (From August 8-Sept 7, 1980). Previous year’s shutdown continues till September 7, 1979. 5. Assume that the level of ending inventory in August 1980 is same as that planned for August 1979 (i.e. 8013 units) 6. Assume that the shipment pattern given in exhibit 5 is representative of the requirement in fiscal 1980 also. 7. Do not include super and slimline in your calculations. 8. Note that under the current operation, the plant works 5 days a week with one shift and the regular holidays are observed as per exhibit 4. 9. Please note that each change over between the products (for example from Midget to Breeze Queen) requires two shifts. This loss of production time is in addition to the $6000 cost mentioned in the case.
Case Study
Don’t Bother Me, I can’t Cope
Submission Date
3-Nov-2009
Class
EPGP– 09-10
Subject
SOM
Instructor
Prof. N. Ravichandran Prof. Rohit Kapoor
Submitted by Rajendra Inani
Table of contents Summary of Analysis and Results.....................................................................................................................7 Line A – Existing Production 315 Units / Day..................................................................................................8 Line A –Desired Production 420 Units/ Day................................................................................................... ..8 Line B –Existing Production 140 Units/ Day.....................................................................................................9 Line B –Desired Production 210 Units/ Day.....................................................................................................9
Summary of Analysis and Results
On analysis of the given case, as described in subsequent recommendations. Line A: Solution 1 is suitable, if this order has to be continued days. # Units Per Unit Per Day Regular # of Regular Produced Contributio Contributio wages workers hours / Day n (Rs) n (Rs) (Rs) 420 30 12600 18 9 8 (Desired) 420 30 12600 18 7 8 (Desired) 315 (Old) 30 9450 18 7 8
sections following is the for more than 91 working Over Time Hours 0
Wages / Day + OverTime 1296
Contribution / Day / Worker 1256
2
1428
1596
0
1008
1206
Solution 1: This recommendation requires hiring two additional resources, which involves Rs. 12000 training cost and per day wages is Rs. 1296. Solution 2: This solution has continuing with 7 workers with 2 hours of overtime each day. The differential wage per day including overtime is Rs. 132 in this case. (12000 / 132 = 90.90) Line B: Solution 1 is suitable # Units Per Unit Per Day Regular # of Regular Over Wages / Contribution Produced Contributio Contributio wages workers hours Time Day + OT / Day / / Day n (Rs) n (Rs) (Rs) Hours +Rejection Worker Expenses 529.2 210 30 6300 18 3 8 1 1923.6 (Desired) 576 210 30 6300 18 4 8 0 1431 (Desired) 140 (Old) 30 4200 18 2 8 0 288 1956 Solution 1: This recommendation requires hiring one additional resource, which involves Rs. 6000 training cost. In this case, the Efficiency of operation is maintained at 100%, but involved overtime for 1 worker for 1 hour. (Actually making 16 extra unit consuming 36 minutes on 3 rd workbench), considering wages of Overtime and 1% rejection due to fatigue. Solution 2: This recommendation requires hiring two additional resource, which involves Rs. 12000 training cost. But wages exceeds to Rs. 576, more than solution 1.
Line A – Existing Production 315 Units / Day Activity Activity Time (Sec) Immediate Predecessor 1 30 None 2 50 None 3 40 1 4 50 1 5 20 2 6 10 3 7 10 4,5 8 20 2 9 10 6 10 40 9 11 20 7 12 30 7 13 50 9 14 50 10 15 10 11 16 40 8,12 Total Lead Time 480 Cycle Time for 315 Units / Day = 420 Mins / 315 Units = 1.33 Minutes/ Unit = 80 Seconds / Unit Nos of Work Station required = Lead Time x Prod Units / Available Time = 6 Work Stations Presently, Mr. Sane is using 7 workstations against the needed 6 work Stations as following. W/S
1 2 3 4 5 6 7
Activities 1,3 2,5 4,8 6,9,13 7,10,11 14,15 12,16
Time (Seconds) 70 70 70 70 70 60 70
Time (Minutes) 1.166667 1.166667 1.166667 1.166667 1.166667 1 1.166667
Idle Time (Minutes) 0.163333 0.163333 0.163333 0.163333 0.163333 0.33 0.163333
Available Time (Minutes) = 7 W/S x Cycle Time 1.33 Mins = Idle time Efficiency % = 8 Mins / 9.31 Mins = Line A –Desired Production 420 Units/ Day
9.31 1.31 85.93
Cycle Time for 420 Units / Day = 420 Mins / 420 Units = 1 Minutes/ Unit = 60 Seconds / Unit Nos of Work Station required = Lead Time x Prod Units / Available Time = 8 Work Stations W/S Activities Time (Seconds) Maximum Production Capacity (# of Units / day) 1 2 50 504 2 1,5 50 504 3 3,8 60 420 4 4,6,7 70 360 5 9,13 60 420 6 10,11 60 420 7 14,15 60 420
8
12,16
70
360
With the given nature of certain tasks, we cannot group them in a way that each Work Station can have less or equal to 60 Seconds (Cycle Time) of tasks. Thus, Work Stations 4 and 8 would have Bottleneck capacity of 360 Units / Day, which is less then desired 420 Units/ Day. With Work Stations = 9, following organization would be suitable. W/S Activities Time (Seconds) Maximum Production Capacity (# of Units / day) 1 1 30 504 2 2 50 504 3 3,5 60 420 4 4,6 60 360 5 10 40 420 6 7,11,12 60 420 7 9,13 60 420 8 14,15 60 360 9 8,16 60 Available Time (Minutes) = 9 W/S x 420 Mins each day Utilized time = Lead time 8 Mins x Units Producted 420 Units Efficiency % = Utilized Time / Available Time
3780 3360 88.89
Line B –Existing Production 140 Units/ Day Activity
a b c d e f g h Lead Time W/S
1 2
Activities
a,b,c,d e,f,g,h
Activity Time (Sec)
40 50 70 20 50 40 60 30 360 Time (Seconds)
180 180
Immediate Predecessor
None None a a a b,c e d,f,g 6 Minutes Maximum Production Capacity (# of Units / day) 140 140
Available Time (Minutes) = 2 W/S x 420 Mins each day Utilized time = Lead time 6 Mins x Units Producted 140 Units Efficiency % = Utilized Time / Available Time
840 840 100.00
Line B –Desired Production 210 Units/ Day Cycle Time for 210 Units / Day = 420 Mins / 210 Units = 2 Minutes/ Unit = 120 Seconds / Unit Nos of Work Station required = Lead Time x Prod Units / Available Time = 3 Work Stations W/S Activities Time Maximum Production Production Capacity with 1 Hour (Seconds) Capacity (# of Units / Overtime day) 1 a,b, d 110 229 262 (Not used)
2 3
c,e f,g,h
120 130
210 194
240 (Not used) 222 (Used for extra 16 Units only – 36 Minutes)
Available Time (Minutes) = 3 W/S x 420 Mins each day Utilized time = Lead time 6 Mins x Units Producted 210 Units Efficiency % = Utilized Time / Available Time
1260 1260 100.00
